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PARTNERSHIP AGREEMENT
OF
MILFAM II L.P.
THIS PARTNERSHIP AGREEMENT is made and entered into as of the 11th day
of December, 1996 between Milfam LLC, an Ohio limited liability company (herein
referred to as the "General Partner"), Trust B under Section 6 of the Amended
and Restated Trust U/A Xxxxx X. Xxxxxx, dated September 20, 1983, Trust D under
Section 8 of the Amended and Restated Trust U/A Xxxxx X. Xxxxxx, dated September
20, 1983, Xxxxx X. Xxxxxx, III, and Xxxxxx X. Xxxxxx (herein collectively
referred to as the "Limited Partners").
DEFINED TERMS
Capitalized words and phrases used in this Agreement have the following
meanings:
(a) "Act" means the Georgia Revised Uniform Limited Partnership Act
law, as set forth in Sections 14-9-100 to -1204 of the Georgia Code Annotated,
as amended from time to time (or any corresponding provisions of succeeding
law).
(b) "Agreement" or "Partnership Agreement" means this partnership
agreement, as amended from time to time. Words such as "herein," "hereinafter,"
"hereof," "hereto" and "hereunder," refer to this Agreement as a whole, unless
the context otherwise requires.
(c) "Bankruptcy" of a Partner shall be deemed to have occurred 60 days
after the happening of any of the following: (1) the filing of an application by
a Partner for, or a consent to, the appointment of a trustee of the Partner's
assets, (2) the filing by a Partner of a voluntary petition in bankruptcy or the
filing of a pleading in any court of record admitting in writing the Partner's
inability to pay the Partner's debts as they come due, (3) the making by a
Partner of a general assignment for the benefit of creditors, (4) the filing by
a Partner of an answer admitting the material allegations of, or consenting to,
or defaulting in answering a bankruptcy petition filed against the Partner in
any bankruptcy proceeding, or (5) the entry of an order, judgment, or decree by
any court of competent jurisdiction adjudicating a Partner bankrupt or
appointing a trustee of the Partner's assets, and that order, judgment, or
decree continuing unstayed and in effect for a period of 60 days.
(d) "Basis Point" means one hundredth of one percent (.01 percent), 100
Basis Points are equal to one percent.
(e) "Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) To each Partner's Capital Account there shall be
credited such Partner's Capital Contributions, such
Partner's distributive share of Profits and any
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items in the nature of income or gain which are
specially allocated to such Partner.
(ii) To each Partner's Capital Account there shall be
debited the amount of cash and the Gross Asset Value
of any Partnership Property distributed to such
Partner pursuant to any provision of this Agreement
net of liabilities assumed by the Partner or to which
such property is subject, and such Partner's
distributive share of Losses and any items in the
nature of expenses or losses which are specially
allocated to such Partner.
(iii) In the event any interest in the Partnership is
transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it
relates to the transferred interest.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Regulations. The General Partner shall make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Sections 1.704-1(b) and 1.704-2 of the Regulations.
(f) "Capital Contribution" means, with respect to any Partner, the
amount of money and the initial Gross Asset Value of any property (other than
money) contributed to the Partnership by such Partner.
(g) "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).
(h) "Family" and "Family Member" mean Xxxxxxxxx Xxxx and her
descendants and trusts created for their benefit.
(i) "General Partner" means any Person who (i) is listed as such in
Exhibit A, attached, or has become a General Partner pursuant to the terms of
this Agreement, and (ii) has not ceased to be a General Partner pursuant to the
terms of this Agreement.
(j) "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be
the gross fair market value of such asset, as
determined by the contributing Partner and the
Partnership;
(ii) The Gross Asset Value of all Partnership assets shall
be adjusted to equal their respective gross fair
market values, as determined by the General
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Partner, as of the following times: (a) the
acquisition of an additional interest in the
Partnership by any new or existing Partner in
exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership
to a Partner of more than a de minimis amount of
Partnership Property as consideration for an interest
in the Partnership if the General Partner reasonably
determines that such adjustment is necessary or
appropriate to reflect the relative economic
interests of the Partners in the Partnership; and (c)
the liquidation of the Partnership within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g);
(iii) The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair
market value of such asset on the date of
distribution; and
(iv) The Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to
Section 1.704-1(b)(2)(iv)(m) of the Regulations; -
provided, however, that Gross Asset Values shall not
be adjusted to the extent the General Partner
determines that an adjustment is not necessary or
appropriate in connection with a transaction that
would otherwise result in an adjustment.
If the Gross Asset Value of an asset has been determined or adjusted, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses.
(k) "Xxxxxx Brothers Rate of Return" means the rate of return of the
Xxxxxx Brothers Intermediate Bond Index for the period in question expressed in
Basis Points, as determined by a third party selected by the General Partner who
is qualified to make such a determination.
(l) "Limited Partner" means any Person whose name is set forth on
Exhibit A of this Agreement as Limited Partner or who has been admitted as an
additional or Substituted Limited Partner pursuant to the terms of this
Agreement. "Limited Partners" means all such Persons.
(m) "Net Cash Flow" means the gross cash proceeds from Partnership
operations and from the sale or other disposition of assets of the Partnership
less the portion thereof used to pay or establish reserves for all Partnership
expenses, debt payments, capital improvements, replacements and contingencies,
all as determined by the General Partner. "Net Cash Flow" shall not be reduced
by depreciation, amortization, cost recovery deductions or similar allowances.
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(n) "Partners" means all General Partners and all Limited Partners,
where no distinction is required by the context in which the term is used
herein. "Partner" means any one of the Partners.
(o) "Partnership" means the partnership formed pursuant to this
Agreement and the partnership continuing the business of this Partnership in the
event of dissolution as herein provided.
(p) "Partnership Property" means all real and personal property
acquired by the Partnership and any improvements thereto, and shall include both
tangible and intangible property.
(q) "Person" means any individual, partnership, corporation, trust or
other entity.
(r) "Profits" and "Losses" means, for each fiscal year or other period,
an amount equal to the Partnership's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(l) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Partnership that is exempt from
federal income tax and not otherwise taken into
account in computing Profits or Losses shall be added
to such taxable income or loss;
(ii) Any expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Profits or Losses shall be
subtracted from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Partnership
asset is adjusted, the amount of such adjustment
shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing
Profits or Losses.
(iv) Gain or loss resulting from any disposition of
Partnership Property with respect to which gain or
loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset
Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs
from its Gross Asset Value;
(v) Notwithstanding any other provision herein, any items
which are specially allocated shall not be taken into
account in computing Profits or Losses.
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(s) "Regulations" means the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
(t) "Standard & Poor's Rate of Return" means the rate of return of the
Standard & Poor's Index for the period in question expressed in Basis Points, as
determined by a third party selected by the General Partner who is qualified to
make such a determination.
(u) "Substituted Limited Partner" means any Person admitted to the
Partnership as a Limited Partner pursuant to Article 6 hereof.
(v) "Unit(s)" means any one (or part thereof) or more of the 1 million
units that are authorized to be issued to Partners representing an interest in
the Partnership as described in this Agreement.
ARTICLE 1
NAME AND PURPOSES
SECTION 1.1 FORMATION. The Partners do hereby form the Partnership as a
limited partnership pursuant to the Act, for the purposes hereinafter described.
SECTION 1.2 NAME AND OFFICE. The Partnership shall be conducted under
the name of Milfam II L.P. (the "Partnership"). The principal office and place
of business of the Partnership in Georgia shall be located at 0000 Xxxxxxxxx
Xxxxxx, X.X., Xxxxxxx Xxxxxxx 00000, or such other place as the General Partner
may from time to time determine on prior notice to the Limited Partners.
SECTION 1.3 PURPOSES AND POWERS.
(a) The purposes of the Partnership and the business to be carried on
and the objectives to be effected by it are:
(i) To acquire, hold, and, in all respects, deal with
stocks, bonds, and other investment securities and,
in the sole discretion of the General Partner, to
acquire one or more memberships on recognized
national exchanges and to engage in any other
business permitted by the Act in order to make a
profit, increase Family wealth, and provide a means
for members of the Family to become knowledgeable of
and preserve Family assets;
(ii) To provide a means for resolving any disputes that
may arise among Family members with respect to the
management of Family assets so as to
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preserve harmony among Family members and avoid costs
associated with litigation;
(iii) To maintain control of Family assets;
(iv) To provide a means to consolidate certain Family
assets;
(v) To provide more centralized management for Family
assets;
(vi) To serve as liaison with outside advisors, such as
legal counsel, accountants, banks and portfolio
managers;
(vii) To benefit from economies of scale that can be
realized by consolidating Family assets;
(viii) To provide a means of facilitating gifts to Family
members without fractionalizing assets;
(ix) To provide protection to Family assets from claims of
creditors brought against Family members;
(x) To prevent the transfer of a Family member's interest
in Family assets in the event of a failed marriage;
(xi) To provide flexibility in taking advantage of
business and investment opportunities, to increase
Family wealth and profits that are not available
through trusts, corporations or other entities, and
to make investments in accordance with the modern
portfolio theory;
(xii) To facilitate the administration and reduce the cost
associated with the disability or probate of the
estate of Family members and to reduce or eliminate
probate and guardianship proceedings in foreign
jurisdictions;
(xiii) To promote knowledge of and communication about
Family assets while allowing restrictions to be
placed on disclosure of information thereby
permitting confidentiality to be preserved as needed;
(xiv) To enter into, continue, perform and carry out
contracts of any kind necessary to, in connection
with, or incidental to, the accomplishment of the
purposes of the Partnership;
(xv) To acquire any property, or any rights therein or
appurtenant thereto, necessary for the accomplishment
of such purposes;
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(xvi) To borrow money, and to issue evidence of
indebtedness and to secure the same by mortgage, deed
of trust, pledge or other lien, in furtherance of any
or all of the purposes of the Partnership, and to
continue in effect and assume any liabilities or
indebtedness that may have been incurred by any
predecessor partnership; and
(xvii) To carry on any other activities necessary to, in
connection with or incidental to the foregoing.
SECTION 1.4 TERM. The Partnership shall continue in full effect until
December 31, 2050, and thereafter from year to year with the agreement of all
Partners, unless sooner dissolved and terminated as herein provided.
SECTION 1.5 AGENT AND TAX MATTERS PARTNER. Xxxxx X. Xxxxxx, III shall
be the Tax Matters Partner for the Partnership for purposes of Section
6231(a)(7) of the Code. CT Corporation System shall be the agent for the
Partnership for service of process in the State of Georgia.
ARTICLE 2
CAPITAL CONTRIBUTIONS
SECTION 2.1 CAPITAL CONTRIBUTIONS. Each Partner has made or will make a
Capital Contribution to the Partnership in the amount set forth on Exhibit A.
Contributions may be made in cash or property. In addition, a contribution may
be made by delivery of a promissory note or other obligation to contribute cash
or property. Each Partner's Capital Contribution is based upon the number of
Units the Partner acquires. The Partnership is authorized to issue up to 100,000
Units at an initial cost of $1,000 per Unit. Fractional Units may be issued.
SECTION 2.2 DIVERSIFICATION. The initial Capital Contribution made by
each Partner will be in the form of stocks, bonds and other securities. No such
Capital Contribution will be accepted by the Partnership if the acceptance
thereof would cause the Partnership to be an "investment company" within the
meaning of section 351 of the Code and the regulations thereunder. To provide
further assurance that the Partnership will not be an investment company as a
result of accepting a Capital Contribution made by any Partner, each Partner
will be required to contribute, as such Partner's initial Capital Contribution,
a "diversified portfolio of stocks and securities" within the meaning of Section
1.351-1(c)(6) of the Regulations.
SECTION 2.3 FUTURE CAPITAL CONTRIBUTIONS. If the Partnership requires
additional funding to provide working capital or for any other purpose, no
Partner shall have any obligation to advance such funds personally to the
Partnership except as otherwise provided herein.
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SECTION 2.4 LOANS TO THE PARTNERSHIP. Any Partner will be permitted to
make loans to the Partnership from time to time in such amounts and on such
terms as such Partner and the Partnership may agree. In no event, however, will
a Partner be permitted to loan funds to the Partnership on terms less favorable
to the Partnership than those that could be obtained from an unrelated creditor.
SECTION 2.5 GENERAL PROVISIONS. A Limited Partner shall not be liable
for any of the debts of the Partnership or be required to contribute any capital
or lend any funds to the Partnership other than as expressly provided in this
Agreement. The General Partner shall not have any personal liability for the
repayment of the Capital Contributions of any Limited Partner, except as
provided to the contrary in this Agreement. Unless otherwise provided herein, no
interest will be paid on or imputed to any capital contributed to the
Partnership.
SECTION 2.6 ADDITIONAL UNITS. The Partnership may increase the number
of authorized Units with the consent of Partners holding a majority of the
Units. The cost of additional Units will be determined by the General Partner by
dividing the total value of Units outstanding by the number of Units
outstanding. The determination will be made as nearly as practicable to the date
on which additional Units are to be issued.
ARTICLE 3
RIGHTS, POWERS AND DUTIES OF THE PARTNERS
SECTION 3.1 MANAGEMENT AND CONTROL OF THE PARTNERSHIP.
(a) The General Partner shall have the full and exclusive right to
manage and control the business and affairs of the Partnership and to make all
decisions regarding the affairs of the Partnership. In the course of such
management, the General Partner may acquire, encumber, hold title to, pledge,
sell, release or otherwise dispose of Partnership Property and interests therein
when and upon such terms as it determines to be in the best interests of the
Partnership. The General Partner shall have all of the rights, powers and
obligations of a partner of a partnership without limited partners, except as
otherwise provided under the Act.
(b) No Limited Partner who is not also a General Partner shall
participate in the management of or have any control over the Partnership's
business nor have the power to represent, act for, sign for or bind the General
Partner or the Partnership.
(c) In fulfilling its obligations set forth in paragraph (a) above, and
to the extent not inconsistent with that paragraph, the General Partner shall
have the authority to borrow money in the name of the Partnership, and in
connection with any such borrowing, to mortgage, pledge, encumber and
hypothecate the assets of the Partnership.
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SECTION 3.2 AUTHORITY OF THE GENERAL PARTNER. In addition to the rights
and powers the General Partner has under this Agreement and law, the General
Partner shall, except to the extent otherwise provided herein, have all rights
and powers required or appropriate to manage the Partnership business, including
without limitation, the right to hire other professional advisors and other
personnel to provide services to the Partnership. To accomplish the purposes of
the Partnership the authority of the General Partner includes, but is not
limited to the following:
(a) to purchase, sell, invest in and deal in stocks, bonds, notes,
evidence of indebtedness and any other securities of any person whether foreign
or domestic;
(b) to guarantee the financial transactions of others that are for the
benefit of the Partnership;
(c) to borrow money;
(d) to sell, pledge, or dispose of assets of the Partnership;
(e) to carry such insurance as the General Partner deems necessary; and
(f) to perform all acts deemed appropriate by the General Partner to
carry out the purposes of the Partnership.
SECTION 3.3 AUTHORITY OF PARTNERS TO DEAL WITH THE PARTNERSHIP. The
Partnership may acquire property or services from any Partner, or lease or sell
any property to the any Partner provided the terms of such transactions are
arm's-length and in furtherance of the purposes of the Partnership.
SECTION 3.4 RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER.
(a) Without the unanimous consent of the Limited Partners, the General
Partner shall not have the authority to:
(i) Do any act in contravention of this Agreement;
(ii) Do any act which would make it impossible to carry on
the business of the Partnership;
(iii) Confess a judgment against the Partnership;
(iv) Admit a Person as a General Partner; or
(v) Elect to dissolve the Partnership.
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SECTION 3.5 DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER.
(a) The General Partner shall use his best efforts to take all actions
that may be necessary or appropriate for the continuation of the Partnership's
valid existence as a limited partnership and for the acquisition, holding and
operation of Partnership Property, in accordance with the provisions of this
Agreement and applicable laws and regulations.
(b) The General Partner shall at all times act with integrity and good
faith and exercise diligence in all activities relating to the conduct of the
Partnership business and in resolving conflicts of interest.
(c) The General Partner shall prepare or cause to be prepared and shall
file on or before the due date (or any extension thereof) all Federal, state and
local tax returns required to be filed by the Partnership. The General Partner
shall, to the extent that Partnership funds are available, cause the Partnership
to pay any taxes payable by the Partnership.
(d) The General Partner shall use its best efforts to cause the
Partnership to be formed, reformed, qualified to do business or registered under
any applicable assumed or fictitious name statute or similar law if required by
such law in any state in which the Partnership then owns property or transacts
business.
(e) The General Partner shall have the sole and exclusive right to
manage and operate the business of the Partnership with full and exclusive
authority to act for and on behalf of and as agent of the Partnership and to
take any and all reasonable actions deemed by the General Partner to be
necessary or advisable in connection therewith. The General Partner shall
operate the business of the Partnership in a commercially reasonable manner and
shall do so at such time and in such manner as the General Partner, in its sole
discretion, shall reasonably deem fit and further, shall endeavor and take all
reasonable actions to operate the Partnership so as to provide income and
capital growth for the Partners.
SECTION 3.6 OTHER RIGHTS OF LIMITED PARTNERS. The Limited Partners
shall not participate in the management or control of the business of, or
transact any business for, the Partnership. The Limited Partners shall have no
power to sign for or bind the Partnership in their capacity as Limited Partners.
Limited Partners owning 90% or more of the outstanding Units held by Limited
Partners will have the right to remove the General Partner at any time.
SECTION 3.7 OTHER INTERESTS OF PARTNERS. The Partners may engage in or
possess an interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the investment
business in all its aspects. Neither the Partnership nor the other Partners
shall have any rights in and to such independent ventures or the income or
profits derived therefrom.
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SECTION 3.8 COMPENSATION TO GENERAL PARTNER.
In addition to any Profits that may be allocated to the General
Partner, as compensation for various administrative, reporting, advisory and
other services that are to be performed by the General Partner, the General
Partner will receive a guaranteed payment equal to .25 percent (25 Basis Points)
of the Gross Asset Value of all Partnership assets as of December 31 of each
year. The fee will be payable in four equal quarterly installments during the
succeeding and will be treated as earned during the succeeding year. The fee
will be adjusted if the Partnership has a short taxable year.
SECTION 3.9 CONFIDENTIALITY OF INFORMATION. The Partners acknowledge
that they may receive information regarding the Partnership in the nature of
trade secrets or that otherwise is confidential, the release of which may be
damaging to the Partnership or Persons with which it does business. Each Partner
shall hold in strict confidence any information it receives regarding the
Partnership that is identified as being confidential (and if that information is
provided in writing, that is so marked) and may not disclose it to any Person
other than another Partner, except for disclosures (1) compelled by law, (2) to
advisers or representatives of the Partner or Assignees of the Partner, but only
if they have agreed to be bound by the provisions of this Section 3.9, or (3) of
information that Partner also has received from a source independent of the
Partnership that the Partner reasonably believes obtained that information
without breach of any obligation of confidentiality. The Partners acknowledge
that breach of the provisions of this Section 3.9 may cause irreparable injury
to the Partnership for which monetary damages are inadequate, difficult to
compute, or both. Accordingly, the Partners agree that the provisions of this
Section 3.9 may be enforced by specific performance and other appropriate
injunctive or equitable relief.
ARTICLE 4
ALLOCATIONS
SECTION 4.1 ALLOCATION OF PROFITS AND LOSSES.
(a) PROFITS. Profits for any fiscal period shall be allocated among the
Partners as follows:
(1) First, Profits shall be allocated to Partners who
have been allocated Losses pursuant to Section
4.1(b)(2) in proportion to the Losses so allocated to
them until the cumulative amount of Profits allocated
to Partners pursuant to this Section 4.1(a)(1) is
equal to the cumulative amount of Losses allocated to
Partners pursuant to Section 4.1(b)(2).
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(2) Second, Profits will be allocated to the General
Partner based upon the investment performance of the
Partnership during the calendar year (or other period
agreed upon by the Partners). The Profits allocated
to the General Partner will be determined as follows:
(i) If the rate of return for equity
investments earned by the Partnership for
the year (or such other period as may be
determined by the Partners) exceeds the
Standard & Poor's Rate of Return by 100
Basis Points or more, the General Partner
will be allocated Profits equal to .50
percent (50 Basis Points) of the average
Gross Asset Value of equity investments held
by the Partnership during such year (or
other period determined by the Partners). If
the rate of return for equity investments
earned by the Partnership for the year (or
such other period as may be determined by
the Partners) does not exceed the Standard &
Poor's Rate of Return by 100 Basis Points or
more, the General Partner will be allocated
Profits equal to .05 percent (5 Basis
Points) of the average Gross Asset Value of
equity investments held by the Partnership
during such year (or other period determined
by the Partners). If the period over which
the rate of return is measured is greater
than or less than one year, appropriate
adjustments will be made to the amount by
which the rate of the return earned by the
Partnership on equity investments must
exceed the Standard & Poor's Rate of Return
in order for the General Partner to earn .50
percent rather than .05 percent of the Gross
Asset Value of equity investments held by
the Partnership. The rate of return on
Partnership equity investments will be
determined in the same manner that the
Standard & Poor's Rate of Return is
determined.
(ii) If the rate of return for fixed income
investments earned by the Partnership for
the year (or such other period as may be
determined by the Partners) exceeds the
Xxxxxx Brothers Rate of Return by 100 Basis
Points or more, the General Partner will be
allocated Profits equal to .50 percent (50
Basis Points) of the average Gross Asset
Value of fixed income investments held by
the Partnership during such year (or other
period determined by the Partners). If the
rate of return for fixed income investments
earned by the Partnership for the year (or
such other period as may be determined by
the Partners) does not exceed the Xxxxxx
Brothers Rate of Return by 100 Basis Points
or more, the General Partner will be
allocated Profits equal to .05 percent (5
Basis Points) of the average Gross Asset
Value of fixed income investments held by
the Partnership during such year (or other
period determined by the
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Partners). If the period over which the rate
of return is measured is greater than or
less than one year, appropriate adjustments
will be made to the amount by which the rate
of the return earned by the Partnership on
equity investments must exceed the Xxxxxx
Brothers Rate of Return in order for the
General Partner to earn .50 percent rather
than .05 percent of the Gross Asset Value of
fixed income investments held by the
Partnership. The rate of return on
Partnership fixed income investments will be
determined in the same manner that the
Xxxxxx Brothers Rate of Return is
determined.
(3) Third, any remaining Profits shall be allocated among
Partners based upon the number of Units held by each
Partner in proportion to the number of Units
outstanding.
(b) LOSSES. Losses for any fiscal period shall be allocated among the
Partners as follows:
(1) First, Losses shall be allocated among Partners based
upon the number of Units held by each Partner in
proportion to the number of Units outstanding, except
that Losses shall not be allocated pursuant to this
Section 4.1(b)(1) to the extent such allocation would
cause any Limited Partner to have a deficit in such
Limited Partner's Capital Account at the end of such
fiscal year.
(2) Second, any Loss that cannot be allocated to a
Limited Partner because it would create a deficit in
such Limited Partner's Capital shall be allocated
first to other Limited Partners for whom the
allocation would not create a deficit in such Limited
Partners' respective Capital Accounts in proportion
to the positive balances in such Limited Partner's
Capital Account and then to the General Partner.
SECTION 4.2 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with
Code Section 704(c) and the Regulations thereunder, income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership shall, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of such property
to the Partnership for federal income tax purposes and its initial Gross Asset
Value.
Any elections or other decisions relating to such allocations shall be
made by the General Partner in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Section 4.2 are
solely for purposes of federal, state and local taxes and shall not affect, or
in any way be taken into account in computing, any Partner's Capital
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Account or share of Profits, Losses, other items or distributions pursuant to
any provision of this Agreement.
SECTION 4.3 OTHER ALLOCATIONS RULES.
(a) In the event additional Partners are admitted to the Partnership on
different dates during any fiscal year, or their interests in the Partnership
otherwise vary during the year, the Profits (or Losses) may be allocated to the
Partners in accordance with Section 706, of the Code, or rules comparable to
those allowed by Section 706 of the Code, using any convention permitted by law
and selected by the General Partner.
(b) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the General
Partner using any permissible method under Section 706 of the Code and the
Regulations thereunder.
(c) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction and any other allocations not
otherwise provided for shall be divided among the Partners in the same
proportions as they share Profits or Losses, as the case may be, for the year.
SECTION 4.4 NONRECOURSE LIABILITIES. The allocation provisions set
forth in this Agreement are based on the premise that the Partnership has not
incurred and will not incur any nonrecourse liabilities as that term is defined
in Section 1.752-1(a)(2) of the Treasury regulations. If the Partnership should
incur such liabilities, the Agreement will be amended to assure compliance with
Section 704(b) of the Code and the Treasury regulations thereunder.
ARTICLE 5
DISTRIBUTIONS
SECTION 5.1 DISTRIBUTIONS TO GENERAL PARTNER. Distributions of Net Cash
Flow for any period, if made, will be distributed first to the General Partner
until the cumulative Net Cash Flow distributed to the General Partner under this
Section 5.1 for the current and all past periods is equal to the cumulative
Profits allocated to the General Partner for the current and all prior periods
pursuant to Section 4.1(a)(2).
SECTION 5.2 REMAINING NET CASH FLOW. After the distributions described
in Section 5.1 have been made, if any additional distributions are made, the
balance of the Net Cash Flow will be distributed among the Partners based upon
the number of Units held by each Partner in proportion to the number of Units
outstanding. The timing and the amount of distributions of Net Cash Flow will be
in the sole discretion of the General Partner.
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15
ARTICLE 6
ASSIGNMENT OF LIMITED PARTNER'S INTEREST
SECTION 6.1 GENERAL PROVISION. The Partnership interest of a Limited
Partner, which includes the Units representing such interest, may be assigned in
whole or in part as permitted by the provisions of this Article 6.
SECTION 6.2 ASSIGNEES. The assignment, sale, transfer or pledge of a
Partnership interest, in whole or in part, by a Limited Partner is permitted in
accordance with the terms of this Agreement. Once an interest has been assigned,
transferred, pledged or otherwise encumbered, the assignee, transferee, pledgee
or otherwise (hereinafter, the "assignee") may not exercise any rights of a
Limited Partner with respect to such interest except those granted to the
assignee by the Act unless the assignee becomes a substitute Limited Partner in
accordance with Section 6.3. An assignment entitles the assignee to receive, to
the extent assigned, the assignor's Partnership interest, including, without
limitation, any distributions associated with such interest.
SECTION 6.3 PLEDGES. If any Partner or assignee at any time desires to
pledge or hypothecate any or all of the interest in the Partnership then owned
by him, he may do so provided (i) that such transaction is a bona fide pledge or
hypothecation to a financial institution and (ii) that such financial
institution at the time of such pledge agrees in writing to afford the other
Partners a right of first refusal to repurchase the interest in the Partnership
in the manner described in Section 6.5 in the event of the sale of such interest
upon foreclosure.
SECTION 6.4 TRANSFER TO FAMILY MEMBER. Any Partner may voluntarily
assign, with or without consideration, all or any part of such Partner's
interest in the Partnership to a Family Member provided such Family Member takes
the interest subject to the restrictions set forth in this Agreement.
SECTION 6.5 RIGHT OF FIRST REFUSAL. Except for transfers described in
Section 6.4, if any Person desires to transfer any or all of the interest in the
Partnership owned by him, or if any such interest becomes subject to an
involuntary transfer such Person (the "Transferor") will so notify the
Partnership and the other Partners in writing (the "Other Partners"). The notice
will set forth the name and address of the proposed transferee, who, in the case
of a sale, must be a bona fide prospective purchaser, the date of the proposed
transfer, the proposed transfer price (in terms of a dollar amount) and the
other terms and conditions of the proposed transfer. For a period of 60 days
after receipt of such notice, the Partnership may purchase some or all of the
offered interest by giving written notice to the Transferor. If the Partnership
does not elect to purchase the entire interest, it shall notify the Other
Partners of the portion of the interest it did not elect to purchase, and the
Other Partners shall have 45 days after expiration of such 60-day period to
purchase all, but not less than all, of the interest that the Partnership did
not elect to purchase. Such purchase by the Other Partners will be in proportion
to the ownership interest in
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16
the Partnership owned by such Other Partners (omitting, for purposes of such
calculation, the ownership interest owned by the Transferor) unless they agree
otherwise. If any of the Other Partners declines to purchase his proportion of
such interest, the remaining Other Partners may purchase such interest in
proportion to their interests in the Partnership (counting for this purpose only
the interests in the Partnership of the Other Partners who wish to purchase some
or all of the interest to be transferred). If all of the remaining interest
proposed to be transferred is not agreed to be purchased by the Other Partners,
the Transferor may transfer the remaining interest to the assignee. Any transfer
must completed in accordance with the terms of the notice given to the
Partnership. In addition, Persons to whom any interest is transferred must, as a
condition to such transfer, enter into an agreement with the parties hereto (or
all parties except the transferor) setting forth restrictions on transfer and
other provisions for repurchase identical to the limitations imposed by this
Agreement.
SECTION 6.6 SUBSTITUTE LIMITED PARTNER. The assignee of the whole or a
portion of a Partnership interest shall be admitted as a substitute Limited
Partner upon compliance with the following conditions:
(a) The assignee must deliver to the Partnership an executed
counterpart of the instrument of assignment, satisfactory in substance and form
to the General Partner that contains a statement of the assignor's desire that
the assignee be admitted as a substitute Limited Partner and the assignee's
agreement to be bound by this Agreement. This condition shall be deemed to be
met in the case of a Successor in Interest, defined hereinafter.
(b) The General Partner, in its sole discretion, must consent in
writing to the admission of the assignee as a substitute Limited Partner.
(c) The assignor and the assignee must execute and acknowledge such
instruments as the General Partner may deem necessary or desirable to effect
such admission, and the assignee agrees to pay all expenses in connection with
such admission.
SECTION 6.7 DEATH OF LIMITED PARTNER. The Partnership shall not be
dissolved, wound up and terminated upon the death, insanity, incompetency or
bankruptcy of a Limited Partner. If a Limited Partner shall die or be declared
insane, incompetent or bankrupt, he shall cease to be a Limited Partner and, if
designated by the Limited Partner, his Successor in Interest, as hereinafter
defined, shall succeed to the interest of the former Limited Partner in the
Profits, Losses, credits and distributions of the Partnership. A Limited
Partner's Successor in Interest shall be such person as the Limited Partner,
from time to time, has designated in writing. In the event that a Limited
Partner fails to designate a Successor in Interest, or if the person designated
is not then living, or for any reason renounces or disclaims the Partnership
interest or is unable to succeed to such Partnership interest, the Successor in
Interest shall be the spouse of the former Limited Partner. If the spouse is not
then living or for any other reason is unable to succeed to the Partnership
interest, or if the spouse renounces or disclaims such Partnership interest, or
if there is no spouse, the Successor in Interest shall be the executor or
administrator of the deceased
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17
Limited Partner's estate, the guardian of an insane or incompetent Limited
Partner's estate, or the trustee in bankruptcy of a bankrupt Limited Partner's
estate, who shall hold or distribute such Partnership interest in accordance
with applicable fiduciary law.
SECTION 6.8 RESTRICTIONS ON SUCCESSOR IN INTEREST. The Successor in
Interest shall be subject to all of the restrictions specified in this Article 6
applicable to the assignee of an interest and shall not become a substitute
Limited Partner except upon compliance with the conditions hereinabove
specified. The Successor in Interest shall be entitled to receive all sums
payable with respect to the interest of the Partner to which the Successor in
Interest succeeds. If agreed to by the General Partner, the Successor in
Interest of a deceased former Limited Partner shall be deemed to be the
recipient, for federal income tax purposes, of the portion of the deceased
former Limited Partner's distributive share of the Profit or Loss (or items
thereof) of the Partnership for the taxable year during which the deceased
former Limited Partner died in proportion to the part of the year that the
Successor in Interest is entitled to such Profit or Loss.
SECTION 6.9 WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may
withdraw from the Partnership prior to termination of the Partnership.
ARTICLE 7
SALE OF A GENERAL PARTNER'S INTEREST
SECTION 7.1 GENERAL RESTRICTION. A General Partner shall not transfer
all or any part of his interest in the Partnership without obtaining the consent
of Limited Partners owning a majority of the Units held by Limited Partners.
ARTICLE 8
EVENTS OF WITHDRAWAL
SECTION 8.1 PROCEDURE FOLLOWING EVENT OF WITHDRAWAL. Upon the
occurrence of an Event of Withdrawal, the General Partner concerned shall cease
to be a member of the Partnership and the Partnership shall have the option to
liquidate the Partnership interest of such General Partner. The Partnership and
all its Partners shall be notified of such event by the withdrawing General
Partner or his legal representative or by any remaining General Partner.
SECTION 8.2 EXERCISE OF OPTION. The Partnership shall exercise its
option by serving written notice upon the General Partner concerned or the legal
representative of such General Partner within ninety (90) days from the date it
receives notification of the Event of Withdrawal. The purchase price to be paid
by the Partnership for the interest shall equal the fair market value of such
interest, as determined by agreement of the parties or by appraisal if they
cannot agree
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18
as of the date of such notice, and shall be paid in full by cashier's check or
certified check at the closing or on such other terms as the parties agree.
SECTION 8.3 CONTINUATION OF PARTNERSHIP. If the Partnership exercises
its option, the Partnership shall not dissolve, wind up and terminate but its
business shall be continued if there is a remaining General Partner or, if there
is not a remaining General Partner, if the Limited Partners consent in writing
to the continuation of the business of the Partnership and to the appointment of
a new General Partner effective as of the date of withdrawal of the former
General Partner. The interests of the Partners shall be adjusted appropriately
to reflect the liquidation of the General Partner's interest and, if applicable,
the admission of a new General Partner.
SECTION 8.4 TERMINATION. Upon the occurrence of an Event of Withdrawal
at such time as the Partnership has a sole General Partner, the Partnership
shall be dissolved, wound up and terminated unless all of the Limited Partners
consent in writing to the continuance of the Partnership as contemplated in
Sections 8.3.
SECTION 8.5 EVENT OF WITHDRAWAL DEFINED. For purposes of this
Agreement, an Event of Withdrawal shall include the occurrence of any event set
forth in Section 14-9-602 of the Act upon compliance with any notification
requirements imposed by the Act. A voluntary withdrawal by a General Partner
will not be in violation of this Agreement provided the General Partner provides
written notice to Limited Partners holding 2/3 or more of the Partnership Units
held by Limited Partners at least 10 days in advance of such withdrawal.
ARTICLE 9
PROVISIONS APPLICABLE TO ALL
ASSIGNMENTS AND TRANSFERS
SECTION 9.1 GENERAL RESTRICTIONS. Notwithstanding anything to the
contrary in this Agreement, any assignment or purchase under Articles 6, 7 or 8
may be prohibited by the General Partner if such assignment or purchase would,
in the opinion of counsel for the Partnership, result in the termination of the
Partnership under Section 708(b)(l)(B) of the Code.
SECTION 9.2 SECTION 6050K. Upon the transfer or assignment of any
Partnership interest, the transferor or assignor must provide to the Partnership
the information set forth in Section 6050 K of the Code, and the Partnership
shall furnish the required information to the Internal Revenue Service, the
transferor and the transferee as required by such section.
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ARTICLE 10
TERMINATION OF THE PARTNERSHIP
SECTION 10.1 EVENTS CAUSING TERMINATION. The Partnership shall
dissolve, wind up and terminate upon the first to occur of the following:
(a) The expiration of the term of the Partnership;
(b) The occurrence of an Event of Withdrawal unless the business of the
Partnership is continued as provided in Article 8;
(c) Upon the written consent of all Partners.
SECTION 10.2 PROCEDURE ON TERMINATION. Upon the occurrence of an event
described in Section 10.1, the General Partner (or, if none, a Limited Partner
appointed by the Limited Partners) shall proceed to liquidate and wind up the
business of the Partnership. Upon fifteen (15) days' prior written notice to all
of the Partners identifying the assets to be sold, the liquidating Partner(s)
may, in lieu of selling the Partnership assets, convey undivided interests in
the assets to the Partners or distribute the assets in kind to the Partners. The
Partnership assets and the proceeds of any liquidation sale shall be applied and
distributed at the closing of any sale in the following order of priority:
(a) To the payment of all debts and liabilities of the Partnership and
all expenses of liquidation.
(b) To the setting up of such reserves as the liquidating Partners may
deem necessary for any contingent liabilities of the Partnership. Any reserves
shall be deposited with an escrowee to be applied to the discharge of any
contingent liabilities, and, at the expiration of whatever period the
liquidating Partner may deem advisable, the balance shall be distributed as
provided in clause (c) below.
(c) The balance, if any, shall be distributed to the Partners in
accordance with their Capital Accounts, adjusted to reflect the Gross Asset
Value of each asset, notwithstanding any statutory priorities the Limited
Partners may have under the provisions of the laws of the Act.
SECTION 10.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the
event the Partnership is "liquidated" within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations, (i) distributions shall be made
pursuant to Article 10 to the Partners who have positive Capital Accounts in
compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations, and (ii) if
any Partner's Capital Account has a deficit balance (after giving effect to all
contributions, distributions and allocations for all taxable years, including
the year during which such liquidation
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occurs), such Partner shall contribute to the capital of the Partnership the
amount necessary to restore such deficit balance to zero in compliance with
Section 1.704-1 (b)(2)(ii)(b)(3) of the Regulations. In the discretion of the
General Partner, a pro rata portion of the distributions that would otherwise be
made to the Partners pursuant to the preceding sentence may be:
(a) Distributed to a trust established for the benefit of the Partners
for the purposes of liquidating Partnership assets, collecting amounts owed to
the Partnership, and paying any contingent or unforeseen liabilities or
obligations of the Partnership or of the Partners arising out of or in
connection with the Partnership. The assets of any such trust shall be
distributed to the Partners from time to time, in the reasonable discretion of
the General Partner, in the same proportions as the amount distributed to such
trust by the Partnership would otherwise have been distributed to the Partners
pursuant to this Agreement; or
(b) Withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the Partners as soon as practicable.
SECTION 10.4 RIGHTS OF PARTNERS. Except as otherwise provided in this
Agreement, each Partner shall look solely to the assets of the Partnership for
the return of his Capital Contribution and shall have no right or power to
demand or receive property other than cash from the Partnership. No Partner
shall have priority over any other Partner as to the return of his Capital
Contributions, distributions or allocations.
ARTICLE 11
FISCAL MATTERS
SECTION 11.1 BOOKS AND RECORDS. The General Partner shall maintain full
and accurate books of the Partnership at the Partnership's principal place of
business, showing all receipts and expenditures, assets and liabilities, Profits
and Losses, and all other records necessary for recording the Partnership's
business and affairs, including those sufficient to record the allocations and
distributions provided for in Article 4 and Article 5. The books of the
Partnership shall be kept on either a cash or an accrual basis as determined by
the General Partner. Each Partner and his duly authorized representatives shall
at all times during regular business hours have access to and may inspect and
copy any of such books and records.
SECTION 11.2 PARTNERSHIP YEAR. The annual accounting period of the
Partnership shall be the calendar year.
SECTION 11.3 PARTNERSHIP BANK ACCOUNTS. The General Partner shall
receive all moneys of the Partnership and shall deposit the same in one or more
banking accounts. All expenditures
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21
by the General Partner shall be made by checks drawn against the Partnership
accounts. Withdrawals from Partnership accounts shall be made upon such
signature or signatures as the General Partner shall authorize.
SECTION 11.4 ACCOUNTING DECISIONS. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the General Partner.
SECTION 11.5 FEDERAL INCOME TAX ELECTIONS. The decision to make or not
make any other election that is described in the Code including, without
limitation, a Section 754 election, shall be made in the discretion of the
General Partner.
ARTICLE 12
ALTERNATIVE DISPUTE RESOLUTION ("ADR"); BINDING ARBITRATION
12.1 AGREEMENT TO USE PROCEDURE. The Partners have entered into this
Agreement in good faith in the belief that it is mutually advantageous to them.
It is with that same spirit of cooperation that they pledge to attempt to
resolve any dispute amicably without the necessity of litigation. Accordingly,
they agree if any dispute arises between them relating to this Agreement (the
"Dispute"), they will first utilize the procedures specified in this Article 12
(the "Procedure") prior to any Additional Proceedings.
12.2 INITIATION OF PROCEDURE. The Partner seeking to initiate the
Procedure (the "Initiating Partner") shall give written notice to the other
Partners, describing in general terms the nature of the Dispute, the Initiating
Partner's claim for relief an identifying one or more individuals with authority
to negotiate the Dispute on such Partner's behalf. The Partner(s) receiving such
notice (the "Responding Partner," whether one or more) shall have five (5)
business days within which to designate by written notice to the Initiating
Partner, one or more individuals with authority to negotiate the Dispute on such
Partner's behalf. The individuals so designated shall be known as the
"Authorized Individuals." The Initiating Partner and the Responding Partner
shall collectively be referred to as the "Disputing Partners" or individually
"Disputing Partner."
12.3 DIRECT NEGOTIATIONS. The Authorized Individuals shall be entitled
to make such investigation of the Dispute as they deem appropriate, but agree to
promptly, and in no event later than thirty (30) days from the date of the
Initiating Partner's written notice, meet to discuss resolution of the Dispute.
The Authorized Individuals shall meet at such times and places and with such
frequency as they may agree. If the Dispute has not been resolved within thirty
(30) days from the date of their initial meeting, the Disputing Partners shall
cease direct negotiations and shall submit the Dispute to mediation in
accordance with the following procedure.
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12.4 SELECTION OF MEDIATOR. The Authorized Individuals shall have five
(5) business days from the date they cease direct negotiations to submit to each
other a written list of acceptable qualified attorney-mediators not affiliated
with any of the Partners. Within five (5) days from the date of receipt of such
list, the Authorized Individuals shall rank the mediators in numerical order of
preference and exchange such rankings. If one or more names are on both lists,
the highest ranking person shall be designated as the mediator. If no mediator
has been selected under this procedure, the Disputing Partners agree jointly to
request a State or Federal District Judge of their choosing (or if they cannot
agree, the Chief Judge of the United States District Court for the county in
which the principal office of the Partnership is located, and if that Judge
refuses to act, the Presiding Judge of the State Administrative Judicial Region
for said county) to supply within ten (10) business days a list of potential
qualified attorney-mediators. Within five (5) business days of receipt of the
list, the Authorized Individuals shall again rank the proposed mediators in
numerical order of preference and shall simultaneously exchange such list and
shall select as the mediator the individual receiving the highest combined
ranking. If such mediator is not available to serve, they shall proceed to
contact the mediator who was next highest in ranking until they are able to
select a mediator.
12.5 TIME AND PLACE OF MEDIATION. In consultation with the mediator
selected, the Authorized Individuals shall promptly designate a mutually
convenient time and place for the mediation, and unless circumstances require
otherwise, such time to be not later than forty-five (45) days after selection
of the mediator.
12.6 EXCHANGE OF INFORMATION. In the event any Disputing Partner to
this Agreement has substantial need for information in the possession of another
Disputing Partner to this Agreement in order to prepare for the mediation, all
Disputing Partners shall attempt in good faith to agree to procedures for the
expeditious exchange of such information, with the help of the mediator if
required.
12.7 SUMMARY OF VIEWS. At least seven (7) days prior to the first
scheduled session of the mediation, each Disputing Partner shall deliver to the
mediator and to the other Disputing Partners a concise written summary of its
views on the matter in Dispute, and such other matters required by the mediator.
The mediator may also request that a confidential issue paper be submitted by
each Disputing Partner to him.
12.8 PARTIES TO BE REPRESENTED. In the mediation, each Disputing
Partner shall be represented by an Authorized Individual and may be represented
by counsel. In addition, each Disputing Partner may, with permission of the
mediator, bring such additional Persons as needed to respond to questions,
contribute information, and participate in the negotiations.
12.9 CONDUCT OF MEDIATION. The mediator shall determine the format for
the meetings, designed to assure that both the mediator and the Authorized
Individuals have an opportunity to hear an oral presentation of each Disputing
Partner's views on the matter in dispute, and that the authorized parties
attempt to negotiate a resolution of the matter in dispute, with or without the
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assistance of counsel or others, but with the assistance of the mediator; to
this end, the mediator is authorized to conduct both joint meetings and separate
private caucuses with the Disputing Partners. The mediation session shall be
private. To the extent permitted under applicable law, the mediator will keep
confidential all information learned in private caucus with any Disputing
Partner unless specifically authorized by such Disputing Partner to make
disclosure of the information to the other Disputing Partner. The Disputing
Partners commit to participate in the proceedings in good faith with the
intention of resolving the Dispute if at all possible.
12.10 TERMINATION OF PROCEDURE. The Disputing Partners agree to
participate in the mediation procedure to its conclusion. The mediation shall be
terminated (1) by the execution of a settlement agreement by the Disputing
Partners, (2) by a declaration of the mediator that the mediation is terminated,
or (3) by a written declaration of a Disputing Partner to the effect that the
mediation process is terminated at the conclusion of one full day's mediation
session. Even if the mediation is terminated without a resolution of the
Dispute, the Disputing Partners agree not to terminate negotiations and not to
commence any litigation or other legal proceedings to resolve the Dispute
("Additional Proceedings") prior to the expiration of five (5) days following
the mediation. Notwithstanding the foregoing, any Disputing Partner may commence
Additional Proceedings within such five (5) day period if the Dispute could be
barred by an applicable statute of limitations.
12.11 FEES OF MEDIATION; DISQUALIFICATION. The fees and expenses of the
mediator shall be shared equally by the Disputing Partners. The mediator shall
be disqualified as a witness, consultant, expert or counsel for any Disputing
Partner with respect to the Dispute and any related matters.
12.12 CONFIDENTIALITY. To the extent permitted under applicable law,
the mediation process shall be confidential, and no stenographic, visual or
audio record shall be made. All conduct, statements, promises, offers, views and
opinions, whether oral or written, made in the course of the mediation by any
Disputing Partner, their agents, employees, representatives or other invitees
and by the mediator shall be confidential and shall, in addition and where
appropriate, be deemed privileged. To the extent permitted under applicable law,
such conduct, statements, promises, offers, views and opinions shall not be
discoverable or admissible for any purpose, including impeachment, in any
litigation or other proceeding involving the parties, and shall not be disclosed
to anyone not an agent, employee, expert, witness, or representative of any of
the Partners; provided, however, that evidence otherwise discoverable or
admissible is not excluded from discovery or admission as a result of its use in
the mediation.
12.13 ARBITRATION. Any dispute, controversy or claim arising out of or
relating to this Agreement, or the breach, termination, or invalidity thereof
which the Partners are unable to resolve using other procedures in this Article
12, shall be settled by arbitration in accordance with the rules of American
Arbitration Association by one or more arbitrators appointed under such rules,
in the place determined by the parties to the dispute, or if they cannot agree
on the location, in Cincinnati, Ohio. The decision of the arbitrator shall be
final and binding upon all parties
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24
hereto. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The expenses of arbitration shall be borne
equally by the Partners who are parties to the dispute.
ARTICLE 13
GENERAL PROVISIONS
SECTION 13.1 NOTICES. Except as otherwise provided in this Agreement,
any and all notices, consents, waivers, requests, votes or other instruments or
communications provided for under this Agreement shall be in writing, signed by
the party giving the same and shall be deemed properly given only if sent by
registered or certified United States mail, postage prepaid, addressed: (a) in
the case of the Partnership or the General Partner, to the Partnership or the
General Partner, as the case may be, at the principal place of business of the
Partnership, (b) in the case of any Partner to such Partner at his address set
forth in the records of the Partnership. Each Partner may, by notice to the
Partnership, specify any other address for the receipt of such instruments of
communications. Any such communication sent by telegram shall be properly given
when received by the person to whom it is sent.
SECTION 13.2 INDEMNIFICATION OF GENERAL PARTNER. A General Partner
shall not be liable to the Partnership or the Limited Partners for any act or
omission performed or omitted by the General Partner in good faith pursuant to
the authority granted to the General Partner by the Partnership Agreement, but
not for fraud, bad faith or gross negligence. The Partnership shall indemnify
the General Partner for any loss or damage incurred by the General Partner on
behalf of the Partnership in or in furtherance of the Partnership interests,
except for liability arising out of fraud, bad faith or gross negligence. If a
claim for indemnification against liabilities under the Securities Act of 1933
(other than for expenses incurred in successful defense) is asserted against the
Partnership by the General Partner under the Agreement or otherwise, the
Partnership will, unless in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction,
the question of whether such indemnification by it is against public policy, and
will be governed by the final adjudication of such issue. In the event the
General Partner pays any debt of the Partnership, the General Partner shall be
reimbursed therefor from Partnership assets.
SECTION 13.3 INTEGRATION. This Agreement embodies the entire agreement
and understanding among the Partners relating to the subject matter hereof, and
supersedes all prior agreements and understandings relating to such subject
matter.
SECTION 13.4 APPLICABLE LAW. This Agreement and the rights of the
Partners shall be governed by and construed and enforced in accordance with the
laws of the State of Georgia.
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SECTION 13.5 COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement binding on all
the parties hereto, notwithstanding that all the parties are not signatory to
the original counterpart.
SECTION 13.6 SEPARABILITY. In case any one or more of the provisions
contained in this Agreement or any application thereof shall be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and any other application thereof
shall not in any way be affected or impaired thereby.
SECTION 13.7 BINDING EFFECT. Except as herein otherwise provided to the
contrary, this Agreement shall be binding upon, and inure to the benefit of, the
Partners and their respective heirs, executors, administrators, successors and
permitted assigns.
SECTION 13.8 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner is
not required to deliver or mail a copy of the Partnership's certificate of
limited partnership or any other certificate to any of the Limited Partners.
SECTION 13.9 AUTHORITY TO AMEND. Amendments to this Agreement shall
require the approval of the General Partner and the Limited Partners owning a
majority of the outstanding Units held by Limited Partners. Notwithstanding the
foregoing, no Partner's interest in Profits, Losses or cash distributions will
be reduced without the consent of that Partner. A copy of any amendment shall be
mailed in advance to all of the Limited Partners.
SECTION 13.10 GENDER. Wherever the context shall so require, all words
herein in a particular gender shall be deemed to include other genders where
applicable. In addition, singular words shall include the plural and plural
words shall include the singular.
SECTION 13.11 MEETINGS. Meetings of the Partners shall be held not less
than fifteen (15) days nor more than thirty (30) days after receipt of written
notice from the General Partner. The General Partner will give notice of a
meeting at any time upon their own choosing or within five (5) days after they
shall receive demand for a meeting from Limited Partners who own at least thirty
percent of the outstanding Units.
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IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
day and year first above written.
[General Partner] MILFAM LLC,
an Ohio limited liability company
By:/s/ Xxxxx X. Xxxxxx, III
------------------------
LIMITED PARTNERS:
Trust B under Section 6 of the Amended and
Restated Trust U/A Xxxxx X. Xxxxxx, dated
September 20, 1983
By:/s/ Xxxxx Xxxxxxxx
------------------------
Trust D under Section 8 of the Amended and
Restated Trust U/A Xxxxx X. Xxxxxx, dated
September 20, 1983
By:/s/ Xxxxxx Xxxxxxxxxxx
------------------------
/s/ Xxxxx X. Xxxxxx, III
---------------------------
Xxxxx X. Xxxxxx, III
/s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
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27
MILFAM II L.P.,
A GEORGIA LIMITED PARTNERSHIP
PARTNERSHIP AGREEMENT
THE INTEREST REPRESENTED HEREBY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT") OR ANY
APPLICABLE STATE LAW. THE INTEREST HAS BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
(i) AN EFFECTIVE REGISTRATION UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (ii) AN OPINION OF COUNSEL
SATISFACTORY TO THE MILFAM II L.P. (THE
"PARTNERSHIP") TO THE EFFECT THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT AND SUCH LAWS.
